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I think the screen on the Nook is better than the Kindle. Don't own a Kindle2 myself, but have seen plenty of people with them on the train and the screen just looks very dark and gray. In comparison, the Nook's screen is very bright so that you get better contrast to the text.
The downside is that from what I've seen of a coworker's nook, is that the interface is really clumsy and the android os is pretty choppy. So I guess the choice isn't so clear cut.
I think I would still get a PRS-505, as the screen seems comparable to the nook, the battery lasts a long time and a PSP charger probably runs less than $10 on ebay now.
If you want something newer, you could take a look at the Pocket Edition, as the screen is just as sharp and bright, though it is smaller, which is something you should check in person.
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